Big on Energy Storage

 

China is betting big on energy storage as AI drives surge in power demand



China has unveiled plans to boost its energy storage sector as it strives to shore up its energy security and cope with a surge in power demand from emerging industries such as artificial intelligence.

The action plan, which was jointly issued by eight government departments, includes measures to step up the development of a slew of next-generation battery technologies and create a small group of leading companies in the field.

The hope is that new energy storage solutions can help China increase efficiency in its renewables sector, allowing it to transition away from fossil fuels without making the power grid vulnerable to outages

“It is about energy sovereignty – not only ensuring sufficient energy supplies in anticipation of rising demand due to AI, but also maintaining the autonomy to decide the energy mix, energy partners and energy policies China adopts,” said Liang Yan, a professor of economics at Willamette University in the United States.

The policy would also help China meet its “double carbon goals” – namely, reaching peak carbon emissions by 2030 and achieving carbon neutrality by 2060, Liang added.

By 2027, China aims to develop three to five leading energy storage enterprises, enhance the global competitiveness of its domestic industry, and deliver higher-performance products, according to the plan.

The government said it would support research into emerging technologies like carbon-lead, magnesium-ion and flow batteries, as well as the development of compressed air and hydrogen energy storage solutions.

Energy storage involves the use of advanced technologies – including batteries – to store excess power generated by wind turbines, solar panels and other facilities during peak periods, which can then be used to keep the grid running if supplies run low.

The technology is particularly crucial in the renewables sector, as supplies of wind and solar energy are unpredictable and can fluctuate dramatically.

Though China has the world’s largest energy storage market, its power grid still struggles to fully absorb electricity generated across regions, particularly from renewables, and wind and solar power curtailment remains a significant issue.

As part of its electricity market reform, China is exploring the integration of new energy storage solutions into the broader grid with a view to using them in scenarios such as peak load management and frequency regulation.

“China is already able to generate large amounts of renewable energy, the focus is now on integrating renewable energy sources and enhancing grid stability,” Liang said. “This would further propel the development and adoption of energy storage technologies.”

According to the plan, China aims to deploy new energy storage solutions in data centres, smart computing labs and other energy-intensive facilities. It will also seek to increase efficiency in related manufacturing industries by integrating blockchain, AI and other emerging technologies.

Other measures in the plan focus on curbing the risks of “blind investment and disorderly expansion” in the energy storage market.

As in China’s lithium battery industry, the energy storage sector has attracted a surge of investment in the past few years, which has led to an intense price war and squeezed the profit margins of many firms.

Last year, more than 280,000 energy storage businesses were registered in China, a nearly 24-fold increase from 2021. But prices in the sector are falling even more rapidly than in the lithium battery industry, domestic media outlet 21st Century Business Herald reported last month.

Nevertheless, China’s energy storage sector continues to race ahead. The country’s installed capacity of energy storage projects soared 130 per cent year on year in 2024, according to the National Energy Administration. Its investment in clean energy research and development is 2.5 times higher than the global average.

US tech giant Tesla is the largest player in the global energy storage market, with a 15 per cent market share, followed by China’s Sungrow. However, Tesla’s market share has been declining since 2020 as a flood of new Chinese players enter the market, according to a report by analytics firm Wood Mackenzie published last August.

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